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Steps to take when your SR&ED claim was reduced by the CRA

You may at some stage find yourself in the position that you have filed an SR&ED claim and the CRA selected it for an audit. You will then have to meet with the CRA’s financial and technical representatives to review the details of the claim. During the discussion, the CRA will not likely give any indication whether or not would approve the claim.

It can come as quite a shock if you later receive the CRA’s SR&ED review report and they propose that the claim be reduced significantly, especially if the meeting seemed to go well from your perspective. The question now becomes “What, if anything, can you do next?”

The good news is that the CRA’s letter is a proposal, which means that nothing has been finalized. You therefore have time to respond to their adjustment proposal by providing additional information. Claimants normally have 30 days to respond to a proposal from the CRA.

In the next section, we’ll detail the steps you should take if you don’t agree with the assessment of the CRA in the SR&ED technical review report’s claim:

Scrutinize the technical review report in fine detail and make absolutely sure that the interpretations are correct. It sometimes happens that the CRA misinterprets the facts that are presented during the meeting between the CRA and the claimant.

  1. Write up a response that restates the facts in such a way that any misinterpretations are clarified.

  2. Make sure that the response to misinterpretations remains focused on the technical challenges.

  3. Provide additional information on the actual work done to find a resolution for the technical challenges.

  4. Include supporting evidence wherever possible and provide specific detail on the different iterations.

When you respond to the CRA, don’t simply state that you disagree with their assessment. That won’t have any effect. In order to change the CRA’s view, it’s key to provide additional clarification on the technical challenges while also submitting new documentation that supports the clarification.

After you have submitted your written response to the CRA, contact them and request a meeting to discuss and review the additional information you have provided. The CRA will afford you the opportunity to present your new information. Engage with the CRA technical reviewer in a discussion during the meeting and attempt to get a feeling of whether they are comfortable with the information presented as it relates to eligibility. Always focus only on the work’s technical challenges.

The CRA will make a final decision once you have discussed the additional information with them to clarify any misinterpreted or missing work. The presentation of additional clarification and new information will hopefully have changed the CRA’s opinion. A final SR&ED review report will then be issued which will take the additional and new information into account.

If the initial claim was prepared in house and you went through the initial review process with the CRA yourself, but then received a proposal that you don’t agree with, you may want to consider getting help from experienced SR&ED consultants.

 


 Written by: 

Shivam Bajaj  

Business Development

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